scarfemp-dual.gms : Scarf's Activity Analysis Example

Description

```Scarf's Activity Analysis Example

Scarf, H, and Hansen, T, The Computation of Economic Equilibria.
Yale University Press, 1973.

Rather than form the MCP explicitly (as in the GAMSLIB model scarfmcp),
we instead use the KKT of the dual form optimization problem:
max_p  sum (h, i(h) * log(expend_h(p))) - p'*sum(h, endow(.,h))
s.t    A'p <= 0, p >= 0

coupled with the income complementarity relationship.

Here expend_h is the expenditure function defined by:
expend_h(p)  = min_c  p'*c   s.t.  u_h(c) >= 1

This is detailed in Rutherford's 1992 paper entitled "Sequential Joint Maximization"

Contributor: Michael Ferris, October 2010
```

Small Model of Type : EQUIL

Category : GAMS EMP library

Main file : scarfemp-dual.gms

``````\$title  Scarf's Activity Analysis Example (SCARFEMP-DUAL,SEQ=54)

\$Ontext

Scarf's Activity Analysis Example

Scarf, H, and Hansen, T, The Computation of Economic Equilibria.
Yale University Press, 1973.

Rather than form the MCP explicitly (as in the GAMSLIB model scarfmcp),
we instead use the KKT of the dual form optimization problem:
max_p  sum (h, i(h) * log(expend_h(p))) - p'*sum(h, endow(.,h))
s.t    A'p <= 0, p >= 0

coupled with the income complementarity relationship.

Here expend_h is the expenditure function defined by:
expend_h(p)  = min_c  p'*c   s.t.  u_h(c) >= 1

This is detailed in Rutherford's 1992 paper entitled "Sequential Joint Maximization"

Contributor: Michael Ferris, October 2010
\$Offtext

\$call gamslib -q scarfmcp
\$include scarfdata.inc

option limrow=0, limcol=0;

positive
variables

p(c)    commodity price,
y(s)    production,
i(h)    income;

equations
mkt(c)          commodity market,
profit(s)       zero profit,
income(h)       income index;

*       distinguish ces and cobb-douglas demand functions:

mkt(c)..        sum(s, a(c,s) * y(s)) + sum(h, e(c,h)) =g=

sum(h\$(esub(h) ne 1),
(i(h)/sum(cc, alpha(cc,h) * p(cc)**(1-esub(h)))) *
alpha(c,h) * (1/p(c))**esub(h)) +

sum(h\$(esub(h) eq 1),
i(h) * alpha(c,h) / p(c));

profit(s)..     -sum(c, a(c,s) * p(c)) =g= 0;

income(h)..     i(h) =g= sum(c, p(c) * e(c,h));

model scarf / mkt.p, profit.y, income.i/;

p.l(c) = 1;
y.l(s) = 1;
i.l(h) = sum(c, p.l(c) * e(c,h));

p.lo(c)  = 0.00001\$(smax(h, alpha(c,h)) gt eps);

*       fix the price of numeraire commodity:

i.fx(h)\$(ord(h) eq 1) = i.l(h);

* For Cobb Douglas
* esub(h) = 1;

solve scarf using mcp;

* save values for testing later
parameter yLev(s);
yLev(s) = y.l(s);

* Now set up the equivalent model using emp

variables z;
equations objdef;

* following works for Cobb Douglas functions (esub(h) = 1) and CES

objdef..
z =e=
sum(h\$(esub(h) ne 1), (i(h)/(1-esub(h)))*log(sum(c, alpha(c,h)*p(c)**(1-esub(h)))))

+sum(h\$(esub(h) eq 1), i(h)*sum(c, alpha(c,h)*log(p(c))))

- sum(c, sum(h, e(c,h))*p(c));

model scarfemp /objdef, profit, income/;

* Set initial values for production (y) and other variables
profit.m(s) = 1;
p.l(c) = 1;
i.l(h) = sum(c, p.l(c) * e(c,h));

file myinfo / '%emp.info%' /;
put myinfo 'equilibrium';
put      / 'max z p objdef profit';
putclose / 'vi income i';

solve scarfemp using emp;
y.l(s) = -profit.m(s);
abort\$[smax{s, abs(yLev(s)-y.l(s))} > 1e-5] 'bad y level (equilibrium)',
y.l, yLev;

* Now reproduce with single opt and dualEqu
* Set initial values for production (y) and other variables
profit.m(s) = 1;
p.l(c) = 1;
i.l(h) = sum(c, p.l(c) * e(c,h));

putclose myinfo 'dualEqu income i';

solve scarfemp using emp max z;
y.l(s) = -profit.m(s);
abort\$[smax{s, abs(yLev(s)-y.l(s))} > 1e-5] 'bad y level (dualEqu)',
y.l, yLev;
``````
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